mobile gambling summit | how impulsive decisions change the meaning of money
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behavioural economics,
gambling & the ‘final five’
A new ‘science’ which seeks to show in what ways and under what
conditions we are irrational.
And it looks to codify these conditions such that we can talk of a
consumer as being systematically or predictably irrational.
Simon Hampton, Lecturer in Psychology, UEA
07432159643
s.hampton077@gmail.com
Simon Hampton
Problem solving or behavioural economics?
What is the difference between a solution and a decision?
You have locked yourself out of your
home?
You want to change your job?
You find yourself looking at the personal
ads?
You plan to replace your car?
Simon Hampton
Problem solving or behavioural economics?
What is the difference between a solution and a decision?
Needs require a solution
Wants require a decision
Simon Hampton
Problem solving or behavioural economics?
What is the difference between a solution and a decision?
It makes sense to say that we learn solutions
We don’t learn decisions
behavioural
economics
A new ‘science’ which seeks to show in what ways and under what
conditions we are irrational.
And it looks to codify these conditions such that we can talk of a
consumer as being systematically or predictably irrational.
Simon Hampton
Princeton 1993
Simon Hampton
Princeton 2003
Simon Hampton
Princeton 2007
Simon Hampton
OUP 2008
Simon Hampton
Palgrave Macmillan 2007
Simon Hampton
Pearson Higher 2008
Simon Hampton
Little Brown 2000
Simon Hampton
Harper Perennial 2004
Simon Hampton
Little Brown 2005
Simon Hampton
Little Brown 2005
Simon Hampton
Hyperion 2006
Simon Hampton
Doubleday 2008
Simon Hampton
Harper Collins 2005
Simon Hampton
Yale 2008
Simon Hampton
William Morrow 2009
Simon Hampton
Harper Collins 2009
Simon Hampton
Harper Collins 2009
Simon Hampton
Springer-Verlag 2010
Simon Hampton
Running order . . .
The axioms of the standard/classical model
‘Animal Spirits’ & macroeconomics
BE ‘games’ & microeconomics
Jar of Coins: Lost Ticket: Sell the Pound: Shirt’s and Car’s
Varieties of irrationality
Acquisition and transaction utility
Affective forecasting
False consensus & False uniqueness
Flashbulb memory
Intrinsic and extrinsic motivation
Risk aversion; & age; & gain & loss; & moral value, and social virtue; Risk substitution
Self perception
Sunk cost
Paradigm shift?: Precisely wrong vs. vaguely right
Simon Hampton
The axioms of the standard/classical model
We know what we want
‘Want’ is determined by subjective utility
Wants are ordered from most to least according to utility
Preferences are transitive (if A > B, & B > C, then A > C)
Note 1: Transitivity is taken to demonstrate 1 – 3
Note 2: The axioms hold for what we do not want: i.e. We know what we do not want etc.
Simon Hampton
The advantages of the standard/classical model
Everything has a value: This is shown by choice
Prediction: Determined, transitive wants allow for it
Equilibrium: If A gives x then it is worth £, but not more
Faults: In showing us what should happen we can see opportunities and risks
Modern economics is the ‘irrational passion for dispassionate rationality’
Simon Hampton
‘Animal Spirits’ & macroeconomics
Simon Hampton
‘Animal Spirits’ & macroeconomics
Confidence
Fairness
Bad faith
The Money Illusion
Stories
Simon Hampton
‘Animal Spirits’ & macroeconomics
Confidence This gives (& removes) stability: there is no economy without it
Fairness If the system isn’t fair it will not – and ought not – last
Bad faith We want to pay less than value & know others want to charge more
The Money Illusion Demonstrated by inflation and interest
Stories ‘There is gold in them there hills’
Simon Hampton
‘Animal Spirits’ & macroeconomics
Confidence
Fairness
Bad faith
The Money Illusion
Stories
Simon Hampton
‘Animal Spirits’ & housing busts
Confidence - in values and trajectory
Fairness - the right thing to do
Bad faith - safe as . . . .
The Money Illusion - no calculation of real cost
Stories – the millionaire cab driver
Simon Hampton
Running order . . .
The axioms of the standard/classical model
‘Animal Spirits’ & macroeconomics
BE ‘games’ & microeconomics
Jar of Coins: Lost Ticket: Sell the Pound: Shirt’s and Car’s
Varieties of irrationality
Acquisition and transaction utility
Affective forecasting
False consensus & False uniqueness
Flashbulb memory
Intrinsic and extrinsic motivation
Risk aversion; & age; & gain & loss; & moral value, and social virtue; Risk substitution
Self perception
Sunk cost
Paradigm shift?: Precisely wrong vs. vaguely right
Simon Hampton
Running order . . .
The axioms of the standard/classical model
‘Animal Spirits’ & macroeconomics
BE ‘games’ & microeconomics
Jar of Coins: Lost Ticket: Sell the Pound: Shirt’s and Car’s
Varieties of irrationality
Acquisition and transaction utility
Affective forecasting
False consensus & False uniqueness
Flashbulb memory
Intrinsic and extrinsic motivation
Risk aversion; & age; & gain & loss; & moral value, and social virtue; Risk substitution
Self perception
Sunk cost
Paradigm shift?: Precisely wrong vs. vaguely right
Simon Hampton
BE ‘games’ & microeconomics
Jar of Coins
Lost Ticket
Sell the Pound
Shirt’s and Car’s
Simon Hampton
BE ‘games’ & microeconomics
Jar of Coins
An auction with one rule:
The bids are sealed but sequential
What happens?
We typically pay more than the value just because
paying more is bound to win.
Simon Hampton
BE ‘games’ & microeconomics
Lost Ticket
Girl turns up at the concert and has lost her pre-paid
£20 ticket: What does she do?
She goes home
Guy turns up at the concert and find he has lost £20
he was going to spend on a ticket: What does he do?
He buys a ticket
Simon Hampton
BE ‘games’ & microeconomics
Sell the Pound
An auction with two players and two rules:
1.Highest bidder gets the pound
2.Second highest bidder pays what he/she bid
What happens?
First bid is 80-90% of value, 2nd is higher . . . .
Typically almost twice the value is paid.
Simon Hampton
BE ‘games’ & microeconomics
Shirt’s and Car’s
You see a shirt (skirt) you want for £30 but know you
can buy the same for £20 half a mile away.
What do you do?
You know you can seal the deal on a car for £30k but
think you can get the same for £29 950 two miles
away.
What do you do?
You save on the shirt and buy the £30k car.
Simon Hampton
The axioms of the standard/classical model
‘Animal Spirits’ & macroeconomics
BE ‘games’ & microeconomics
Jar of Coins: Lost Ticket: Sell the Pound: Shirt’s and Car’s
Varieties of irrationality
Acquisition and transaction utility
Affective forecasting
False consensus & False uniqueness
Flashbulb memory
Intrinsic and extrinsic motivation
Risk aversion; & age; & gain & loss; & moral value, and social virtue; Risk substitution
Self perception
Sunk cost
Paradigm shift?: Precisely wrong vs. vaguely right
Simon Hampton
Running order . . .
The axioms of the standard/classical model
‘Animal Spirits’ & macroeconomics
BE ‘games’ & microeconomics
Jar of Coins: Lost Ticket: Sell the Pound: Shirt’s and Car’s
Varieties of irrationality
Acquisition and transaction utility
Affective forecasting
False consensus & False uniqueness
Flashbulb memory
Intrinsic and extrinsic motivation
Risk aversion; & age; & gain & loss; & moral value, and social virtue; Risk substitution
Self perception
Sunk cost
Paradigm shift?: Precisely wrong vs. vaguely right
Simon Hampton
Acquisition and transaction utility
AU = ‘consumer surplus’
= benefits – price = n+1 - n
TU = ‘value surplus’
= reference price – asked priced = n+1 – n
Counterintuitive results:
A negative AU can be offset by a positive TU
i.e. I don’t really like beans but will buy BOGOF’s
A positive AU can override a negative TU
i.e. Paying more than the known going rate
Simon Hampton
Affective forecasting
How & how well do we predict our emotional state as an
outcome of our decisions?
SEM assumes that we decide on the basis that A will make us
‘happier’ than B (or C etc.)
This applies to alternatives and to do or not to do actions.
The key finding is that we routinely overestimate how happy -
or how unhappy another choice or in action - will make us.
This is shown between rather than with samples - i.e. by asking how
Alex thinks she will feel in comparison to how Betty does feel rather
than how either thought they would feel and how they do feel because
cognitive dissonance acts as a confound.
Simon Hampton
Affective forecasting – why?
Focalism – An established finding is that we find it difficult to feel other than how we feel
at any given moment (e.g. it is not easy to visualise happiness when sad – thinking about
it does not make it so). ‘Wants’ are essentially imaginative and we buy the fantasy.
Forward amnesia – We overlook the events that will, can, do take place between the
decision and the consumption and they tend to negate (rather than inflate) the emotional
value of the purchase.
Psychological immunity – We overcome the perceived deficits or problems that we think
the purchase will solve thus rendering it more-or-less redundant.
Simon Hampton
What do you do that you ought not – or at least not
so much or often?
About how many of your global peer group do as
you do?
>50% ranging to most
Simon Hampton
False consensus
The tendency to think that our (perceived to be)
bad/inappropriate/incorrect attitudes and/or
behaviours are more common than they are.
e.g. drinkers think that more people get drunk than
they do and attend to supporting ‘information’
Such thoughts help to legitimise what we know to
be poor economic decisions
Simon Hampton
False uniqueness
The tendency to think that our (perceived to be)
good/appropriate/correct attitudes and/or behaviours are less
common than they are.
e.g. teetotalers think that fewer people are teetotal than there are (or
that more people drink) and they also attend to supporting
‘information’.
<50% ranging to very few
Such thoughts can help to legitimise what don’t see as poor
economic decisions – e.g. paying more for organic food than
demand dictates.
Simon Hampton
Flashbulb memory
We recall vividly (and often falsely) foul and tragic events .
The media repeat them and this appears to make us think that they
are more common
i.e. we don’t properly distinguish between the number of times bad events
occur and the number of times we see/hear of such the events:
How many victims of Jack the Ripper?
Is crime more common than in the ‘50’s?
Simon Hampton
Flashbulb memory
We recall vividly (and often falsely) foul and tragic events .
The media repeat them and this appears to make us think that they
are more common
i.e. we don’t properly distinguish between the number of times bad events
occur and the number of times we see/hear of such the events:
How many victims of Jack the Ripper? 5
Is crime more common than in the ‘50’s? It’s about half
This is the basis of insurance and ‘insurance’ purchases (i.e. contents and deodorant)
Simon Hampton
Is it appropriate to offer the host of a dinner party the
approximate cost of the food and drink you have
consumed?
Is it appropriate to take, say, six bottles of wine?
A £200 bottle of port?
Why?
Simon Hampton
Intrinsic and extrinsic motivation
Is it appropriate to offer the host of a dinner party the
approximate cost of the food and drink you have
consumed?
Is it appropriate to take, say, six bottles of wine?
A £200 bottle of port?
Simon Hampton
Intrinsic and extrinsic motivation
Rewards make activities means rather than an ends
The means become punishing
The rewards become bribes
Simon Hampton
Intrinsic and extrinsic motivation
Who are they for?
Simon Hampton
Intrinsic and extrinsic motivation
What are they for?
‘Crash victim saved by boob job’
Simon Hampton
Intrinsic and extrinsic motivation
What is it for?
Simon Hampton
Risk
Simon Hampton
Risk
Simon Hampton
Risk aversion
‘We suffer more . . . when we fall . . . than ever we enjoy when we rise’ (Smith: 1759: VI.I.7).
Simon Hampton
Risk & age
We become more risk averse as we age
Nothing – nothing to loose
Something – something loose ergo less to gain
‘We suffer more . . . when we fall . . . than ever we enjoy when we rise’ (Smith: 1759: VI.I.7).
Simon Hampton
Risk and gain and loss
£800 guaranteed win or 85% chance of £1000?
(£100 x .85) + (£0 x .15) = likelihood of a £850 gain
£800 guaranteed loss of a 85% chance of losing £1000?
(£100 x .85) + (£0 x .15) = likelihood of a £850 loss
‘We suffer more . . . when we fall . . . than ever we enjoy when we rise’ (Smith: 1759: VI.I.7).
Simon Hampton
Risk and gain and loss
Risk averse when seeking gain i.e. Sure thing beats the bet
Risk prone when avoiding loss i.e. Bet beats a sure thing
‘We suffer more . . . when we fall . . . than ever we enjoy when we rise’ (Smith: 1759: VI.I.7).
Simon Hampton
Risk, moral value, and social virtue
On the assumption that risk may be seen as a product of a decision x paucity of
information x costs (time, money, effort, distress, loss of control) what are the riskiest
decisions that we make?
Which 3 or 4 things non-reversible, ‘life-long’ decisions have you been (implicitly or
explicitly) pressured to make?
University – Home – Partner – Children
Simon Hampton
Risk, moral value, and social virtue
On the assumption that risk may be seen as a product of a decision x paucity of
information x costs (time, money, effort, distress, loss of control) what are the riskiest
decisions that we make?
Which 3 or 4 things non-reversible, ‘life-long’ decisions have you been (implicitly or
explicitly) pressured to make?
University – Home – Partner – Children
Such decisions cannot be calculated as evidenced by our failure to make them at all if we
try to do so
Simon Hampton
Would you be drive at a slower speed if your seat belt did not work?
Would you drive at a faster speed if it worked again?
Simon Hampton
Risk substitution
Each of us is more or less tolerant (or averse) to any given risk.
i.e. my assessment of the likelihood of a car accident is, say, X:Y
But we see that the likelihood is comprised of a number of factors
i.e. Skill, others, weather, fatigue, brake efficiency . . . .
A decrease in one risk (less traffic) makes us recalibrate another (increase our speed).
Simon Hampton
Self-perception
Extroverted?
Shy?
Garrulous?
Unassuming?
Pretentious?
Thick skinned?
Funny?
Self-perception
Extroverted?
Shy?
Garrulous?
Unassuming?
Pretentious?
Thick skinned?
Funny?
“You are what you are perceived to be”
Self-perception
Extroverted?
Shy?
Garrulous?
Unassuming?
Pretentious?
Thick skinned?
Funny?
“You are what you are perceived to be”
“But we perceive ourselves”
Self-perception
Simon Hampton
Self-perception
The “I” and the “Me” – the looking glass self
“I” is the you that has experiences
“Me” is the awareness of the “I”
‘I think that . . .’; ‘I am in pain’
Self-concept; self-consciousness; self-awareness; self-presentation all entail . . .
Being an object to yourself
Simon Hampton
Self-perception
The “I” and the “Me” – the looking glass self
“I” is the you that has experiences
“Me” is the awareness of the “I”
‘I think that . . .’; ‘I am in pain’
Being an object to yourself
Simon Hampton
Self-perception
The “I” and the “Me” – the looking glass self
“I” is the you that has experiences
“Me” is the awareness of the “I”
‘I think that . . .’; ‘I am in pain’
Being an object to yourself
Simon Hampton
Self-perception
The “I” and the “Me” – the looking glass self
“I” is the you that has experiences
“Me” is the awareness of the “I”
‘I think that . . .’; ‘I am in pain’
Being an object to yourself
Simon Hampton
Sunk cost
If you had bought a non-refundable bus ticket and, whilst waiting for it, a friend offered
you a lift to your intended stop what would you do?
Sunk cost refers to three types of confusion:
If one anticipates value x relative to cost A and x is not forthcoming then additional costs won’t recover
the initial value (I don’t only pay £5 if this is additional to the £10 already spent) – good money after
bad.
If one has incurred a cost no further cost is suffered if a free alterative is accepted (people give away
the gift if such is received when one already has the product)
Consumption of the unwanted give it value – eating what is on your plate doesn’t make it not-wasted.
Simon Hampton
Running order . . .
The axioms of the standard/classical model
‘Animal Spirits’ & macroeconomics
BE ‘games’ & microeconomics
Jar of Coins: Lost Ticket: Sell the Pound: Shirt’s and Car’s
Varieties of irrationality
Acquisition and transaction utility
Affective forecasting
False consensus & False uniqueness
Flashbulb memory
Intrinsic and extrinsic motivation
Risk aversion; & age; & gain & loss; & moral value, and social virtue; Risk substitution
Self perception
Sunk cost
Paradigm shift?: Precisely wrong vs. vaguely right
Simon Hampton
Running order . . .
The axioms of the standard/classical model
‘Animal Spirits’ & macroeconomics
BE ‘games’ & microeconomics
Jar of Coins: Lost Ticket: Sell the Pound: Shirt’s and Car’s
Varieties of irrationality
Acquisition and transaction utility
Affective forecasting
False consensus & False uniqueness
Flashbulb memory
Intrinsic and extrinsic motivation
Risk aversion; & age; & gain & loss; & moral value, and social virtue; Risk substitution
Self perception
Sunk cost
Paradigm shift?: Precisely wrong vs. vaguely right
Simon Hampton
Paradigm shift? Precisely wrong vs. vaguely right
Simon Hampton
Finally . . . .
If we need rationality but it isn’t utility as classically construed what do we replace it with?
Fitness tokens!
Utility is measured by its
proximity to inclusive fitness
(IF) and IF determines value
and risk.
behavioural
economics
simon hampton uea
Simon Hampton
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Personal and Social Identity
Personal
i.e. the unique individual comprising the term ‘I’ or ‘Me’ as opposed to ‘he’
or ‘she’
Social
i.e. the individual who belongs to ‘Us’ or ‘We’ as opposed to ‘them’ or
‘they’
The key point about social identity is that it is that part of us that is not
unique but socially determined
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Categorisation, identity & identification
Comparison, self-esteem & distinctiveness
Social mobility, creativity & minority influence
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Categorisation, identity & identification
We categorise people in order to understand the social environment
We categorise ourselves in order to establish our identity
We find out things about ourselves by knowing what categories we
belong to
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Comparison, self-esteem & distinctiveness
In order to evaluate our self-concept we compare ourselves with others
and find differences & similarities
Comparison with others can raise self-esteem if the similar others enjoy a
positive social identity - i.e. we can see ourselves positively if we see
ourselves as a member of an approved /prestigious group
Comparison can also raise self-esteem if dissimilar others (out groups)
are derogated or selected because they allow for a favourable
comparison - i.e. we can protect/enhance self-esteem via a negative
comparitor group
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Comparison, self-esteem & distinctiveness
Positive and negative distinctiveness
PD – We choose to contrast with other groups in ways that reflect
positively on ours - i.e. key distinctions are highlighted with similar but
inferior groups
ND – We choose to compare and with other groups that reflect positively
on ours - i.e. key similarities are highlighted with similar but superior
groups
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Comparison, self-esteem & distinctiveness
Positive and negative distinctiveness
Because comparison is driven by the need for self-esteem we compare
and contrast in selective and inventive ways
We maximise the profile and status of that which forms the basis of our
positive identity
We minimise the profile and status of that which forms the basis of our
negative identity
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Comparison, self-esteem & distinctiveness
We can see when PD and ND are at play
when an aspect of identity is deployed
to both disambiguate and cohere:
e.g. ‘do different’ - the UEA slogan
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Comparison, self-esteem & distinctiveness
Positive and negative distinctiveness
driven by the need to extract part of
our identity from the groups to which
we belong provides the basis on which
we make decisions which will enhance
our self esteem
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Social mobility, creativity & minority influence
How do/can we deal with a negative social identity?
Mobility: change your membership;
e.g. from working to middle-class
Change: reposition the group
e.g. feminism
Re-imaging: change comparitor dimensions of the group identity
e.g. render a distinctive dimension virtuous - CAMARA
Simon Hampton
Self esteem, positive and negative distinctiveness and choice
Social mobility, creativity & minority influence
The difficulty for esteem comes when we cannot draw positive or
negative distinctions because the group(s) to which we belong are of
such low status and/or power
For example, what comparison can teenagers draw such that their
esteem is raised?
The solution to the problem of upward mobility is to create a new sort of
social identity wherein rarity is the critical commodity
Simon Hampton
The solution to the problem of upward mobility is to create a new
sort of social identity wherein rarity is the critical commodity
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